The Australian dollar got hit hard during the trading session on Wednesday as the 0.78 level continues offer major resistance. At this point, the market continues to fail this area, but at the end of the day, it is very likely that the US dollar strengthening played a huge part in this trade, not necessarily anything involving the Australian dollar. After all, it was a major “risk off” session as we saw risk appetite get pummeled across the markets. With that being the case, the Australian dollar was going to be no different.
Looking at the chart, you can see that the 50-day EMA is sitting right about where we are closing for the session, so I do think that it is probably only a matter of time before that will have to be looked at by technical traders. If we were to continue breaking down, then it is likely that we will go looking towards the 0.76 level. There is a 100-point level of support here, meaning that it is not until we break down below the 0.75 level that you can truly look at this as a major breakdown. If that happens, the uptrend could be in serious trouble for the longer term. At the very least, I would anticipate a move down to the 0.70 level, and you would probably see a lot of negativity creep into multiple markets, not just this one.
To the upside, if we can take out the high that we made two weeks ago, then it is likely that we will go looking towards the 0.80 level. What I do not like about this candlestick is that we are closing at the very bottom of the session, and that typically means that you will get a bit of follow-through. The next couple of days will be crucial, and determine whether or not we are going to have the ability to recover, or if something much more dangerous is afoot. I would not jump into this market for the next couple of sessions; this might perhaps be a setup for next week, because we are at a juncture where we could be making a major decision for the long-term health of the Australian dollar. It is worth noting that the market got here rather quickly, but we also have had a lot of froth worked out as of late as well. The commodity trade continues to be one of the biggest ones, so that is something that is worth paying attention to as well, as the Aussie is so highly correlated to it.
